Why GE's Selling Its Appliance Division 29 comments
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General Electric (GE) looks as though it'll sell off its appliances business, and John Gapper wonders
why GE is not prepared to invest enough in the business to turn it into a global powerhouse when it clearly expects someone else to buy it for that reason.
I think the answer is the same as the reason why CBS bought CNet: publicly-listed companies, be they CBS (CBS) or GE, feel the need to show impressive growth rates, not just in revenues but also in earnings.
A large investment in the GE appliances brand would certainly be expensive; it would also have a relatively low return even if it were successful, because appliances, even when you're a global powerhouse, are a pretty low-margin business.
Haier, of China, by contrast, doesn't have the same pressure from shareholders that GE has. It's perfectly happy to slowly and steadily build a global brand, and it's exported so much over the past few years that has lots of dollars to spend doing so.
The hardest nut to crack if you're trying to build a global brand, of course, is always the USA, so buying GE's appliances business would give Haier a very strong competitive footing against the likes of Korea's LG - and it could get that position overnight, rather than having to build it organically like LG has done.
Meanwhile, GE can take the proceeds from the sale and invest them (if all goes according to plan) at an IRR well above anything Haier might require. Everybody's happy - except, as Gapper notes, the GE Appliances brass in Louisville.
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This article has 29 comments:
Americafirst..... the problem lies in the fact that many unions don't understand how business works, the importance and necessity of shareholders. Maybe if some of them truly understood business they wouldn't end up causing businesses to close, putting their members out on the street.
The engineers are pressured to cut all the corners they can to affect cost savings, savings many of the unions refuse to participate in. Don't blame the engineers, it's through their cost saving attempts that the union rank-in-file has enjoyed a comfortable standard of living. The employees have a say in the quality of the products they produce at GE, so what's your excuse there?
GE, like Microsoft, is now run by an ultimate Peter Principle guy, a shadow of his predecessor.
keep boatloads of people trying to squeeze as much cost out as possible.
It's a good for shareholder but I would not want to work there. You be the judge on whether GE is good for you. :)-
so years.
But it is made in China, like most everything else these days.
Haier can buy it and make the appliances in China and ship them here for a lot less than it costs to make them in Louisville......or if shipping is an issue Haier can make them in Mexico and ship them across the border. Politically GE can't do that. So the sale is really about politics and PR. They know that something has to be done drastically but they just can't, as an American icon, do the dirty work themselves.
GE is in alot of trouble and has been for quite some time.
1st you have to understand that in order to remain a business unit within GE you have to maintain either 1st or 2nd in your primary market focus. You fall to 3rd and stay there more than 30 months....your sold! Unless you are in the Industrial group.
GE considers the industrial group the business that brought them to the party. The IG has been declining for 2 decades. Energy and infrastrucure has been there 2 shiners over the past decade, but those BU'shave been historically manipulated so no one really knows what there true ROI is.
GE has changed dramatically in the past decade, going away from its industrial base and heading for finance, software platforms, biomedical and energy.
IG will be spun off on its own in the next 5 years. In 06 GE sold off its industrial distribution arm which was the 1st sign of things to come in that BU.
GE management is responsible for outsourcing its workforce oversees.
Heres a tidbit of info that is not known right before I go;
GE and TATA Group, lets just say they are learning the 2 step.
Trucking is a leading example.. teamsters still keep the deadbeats and low producers.. it defies common sense.. eventually.. it will change and catch up to the small minded leaders of unions, most who only have a HS education but think they know everything about business. Again, my main point is they fight the companies trying to improve productivity, they keep the deadbeats in jobs.
Having managed several union and non union trucking companies the past 25 years, and having a deadbeat Bro-in-law regale me with stories how he cheats his employer (Ford) and the company cannot touch him, "he does just enough to get by".. "its not my job".. his venom against his employer.. his job is slowly getting replaced just as in the trucking business.. non union companies now dominate the market. By the way.. I think unions are necessary but need to wake up.
An ageing workforce whose medical expenses are becoming unsupportable. Lack of productivity due to union rules and influence causeing the retention of marginal and even counterproductive workers. G.E.'s failure to innovate or maintain the leading edge quality they once had, they have become the cheaper "brand B" that some turn to because of monetary constaints while knowing they are buying an inferior product.
As was said above G.E. makes junk, they know it and so does thier workforce, yet this does not seem to give thier workforce any pause as they continue thier demands for more benefits, shorter hours, improved pay, and a less strenuous work enviroment. Basically they like many other american industrial workers before them have eliminated thier own jobs by failing completely to understand the need to be competitive against thier competitors in what is now a worldwide marketplace.
As the value of the dollar continues to fall and reach new record lows overseas there will be some small relief to the few companies still struggling to manufacture goods within this country. However there are still many other factors that stunt thier chances of success. Employer contributions to worker medical benefits has become an ever expanding black hole that sucks the profits out of any company forced to provide them without reduceing coverage or increaseing co-payments.
I recently watched as what was a wildly successful start-up company four years ago closed it's doors. When asked why the company had failed the founder stated quite simply, "I made a hugh mistake when I started this thing, I promised them health care. I kept that promise and it bankrupted the company and me personally." Wanting more details I stupidly continued asking questions. Next thing I knew I was on the ground with blood coming from my nose. "Listen you f*cking blood sucker I kept my g*ddamn promise to those f*ckers and they f*cked me. I told them the company would close, I begged them to cut down on the g*ddamn docter and hospital visits, I begged them not to go to the E.R. because johnny had the sniffles, what happened?....what happened?...WHAT HAPPENED!!! THEY WENT MORE!!! I'm f*cking broke, I'm bankrupt, and the g*ddamn company still owes another $430,000 in medical bills!!!"
While I cannot represent the mental breakdown of one business owner as being indicitive I feel free to use it as an illustration of my point.
You must be a ge manger! If you were a worker you would see we need unions. In my 30 years with ge I have seen many managers come in and not like a guy and try to fire them for no reason. This is management mentality. You need someone there to help us or big companies would cut wages every year. I don’t know what world you are living in, ge cuts corners to make more money. Buy cheap parts and buys junk from Korea Malaysia an china. The housing market has been bad so with that so will the appliance market.Its not the fault of the workers at appliance park.
It is so nice how they tell you this and then just leave you wondering what the future holds for you... From what I am reading... there are 1,000's of us who are getting screwed out of our pension... Seems like everyone was 18 month's or less away from the 55/25 retirement package... Seems like if we signed a contract that ends 2011, we should be protected until then... are you an unionized plant there? hope we will ban together and get what we worked all theses years for...
I am not being nosy, I work in Warren, Ohio at a lighting plant, which you know is in the "SPIN-OFF"... Any info would be appreciated... we heard that your wages were cut and you have to pay your own benifits... just wondering what's up the road for us here in Warren...
Thank again
On Jun 16 09:45 AM MRFIXER wrote:
> I have been an appliance employee for 30 years now they are dumping
> us thinking this will help the stock. That is a joke. What stocks
> are doing well? Except oil and Google. I will never buy anything
> Ge again. I have given most of my life to this company now they are
> feeding us to the dogs and giving us zip in return. What are American
> works going to do. We don’t produce nothing and when the companies
> stock goes down dump the company an its employees that will fix it.
> I worry about are children there is no company loyalty anymore
On 2008 May 16 03:53 PM americafirst wrote:
> That's because the bureaucrat's have sent all the manufacturing out
> of the country already! Perhaps if our educational system wasn't
> in shambles, the engineers in this country would be properly trained.
> Instead they become "business" majors!